What Is A Money Circle? A.K.A Lending Club

This topic is probably new to many people. Nevertheless, it is a very old mechanism utilized for centuries by many communities around the world. Money Circle is a group of people that come together to pool resources and knowledge in other to help each other financially. Generally, they are exclusively friends, family members, or members of the same communities with generational ties. Depending, where you go the century-old concept carries multiple denominations such as Djangui, Sow, Cuninhas, Tontine, Tandas, Susus, Hui. Typically, the objective revolves around saving money, building wealth, access to interest-free money, or investing money.

Money circle comes in different ways and for different purposes. Nonetheless, the sense of community,loyalty, trust and honesty are at the heart of the concept. If you are by essence a very individualistic person then this might not be for you.


How it works

Money circle is an excellent, risk-free,community-oriented means for many to raise much-needed money to cover expenses. Depending on the size and how resourceful people are, the money can help cover car payments, debt, small investment, and even house down payment.

Members decide collectively per a pre-existing arrangement to collectively loaned a certain amount of money. Every period for instance every week. The pool funds that money with equal contribution from all members. Then, one member receives the complete amount each time. Later, the same experience is repeated on a rotative base. Nevertheless, the arrangement can change if there is a member that is an urgent need of cash.


There is a strong incentive to meet your financial obligations as a member of a money circle. That is because, of the social ties and responsibility between members. The loan is interest-free money or it carries a very low-interest rate, depending on the group’s arrangement. The goal is to help each other not make money from each other. Typically, the default rate is close to 1%.


Benefits of a money circle

Three main reasons encourage people to join or to start a money circle.

  1. Access to cheap loan

Indeed, this is the number one incentive. Because, as a member, you have access to free money at a zero interest rate or at a low-interest rate. The money can help you cover your expenses or build back your credit score in case it was damaged or simply improve your credit score. Nonetheless, if the goal is to increase your credit score make sure to report your payment activities to the three major credit bureaus.

 money circle

2. Strong community attachment

Actually, another major benefit of a money circle is community attachment. Members have a strong desire to help each other and to support all members. Thus reinforcing and strengthening social ties.

 money circle

3. Financial education

Each rotative event is more of a well-organized meeting than a run of the mill activity.During those meetings members typically shared best practices, ideas, experiences, connections, and recommendations.


Drawbacks of a money circle

Normally, everything should be smooth if all the due diligence activities were performed before forming a lending circle. But in case, things weren’t done right here are the potential difficulties that members expose themselves.

  1. Losing your money

This is probably the most critical aspect. Chances are some members for a reason or another might not be in the moral, spiritual, and financial capabilities to follow through with their contribution. If that happens then, you might lose your money, especially if you contributed to that person and was waiting for your own round.

2. Scamming

Multiple people can team up to target one person. They will mount a collective campaign to encourage you to join the circle with sugar coding words and testimonials. After joining, the first few rounds will go well and then when it comes to your round they will be nowhere to be found. Therefore, either you stay away from money circles, or should you decide to join one be sure to perfectly know each member at a personal level.

 money circle

3. Destroy strong relationship

If a money circle goes wrong chances are your personal relationship with your friends, family members or community members will be negatively impacted.

 money circle


The concept has been used for centuries around the world. It is a great way of achieving financial inclusion. Money circles also help people rebuild their credit, fund a major project, start a business, or pay for colleges. Beyond money, it is the assurance you will always be part of a community.

The implementation is not simple. It requires a lot of planning, due diligence, time, and resources. It looks easy to do on paper but many things can actually go wrong. Yet a successful money circle provides great rewards for its members and the community as a whole.


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